News in brief

Munich Re sees strong growth in global insurance market The global insurance market will grow strongly in the years to come, particularly in emerging countries, according to a study by Munich Re. Growth in the reinsurance market will be slower than that in the primary insurance industry, Munich Re says in its Insurance Market Outlook 2013 report. "The global economic recovery is also benefiting the insurance industry. We expect the economies of key industrialised countries to improve in the second half of 2013 and in 2014. Consequently, this will lend impetus to demand for insurance", said Michael Menhart, Munich Re's chief economist. According to Munich Re's estimates, until 2020 the property-casualty insurance market as a whole will grow by approximately 50% compared with 2012 to €1.85tn. Growth in insurance and reinsurance in emerging countries will be significantly stronger than in industrialised countries. Nevertheless, the mature markets in North America, western Europe and the industrialised countries of the Asia/Pacific region remain the dominating growth force. In terms of total primary insurance premiums, their share will fall back to about 73% by 2020 - around ten percentage points lower than in 2012. The share generated by the emerging countries in Asia will move up from 8% to 16%.hide"Approximately half of all the additional premium earned between 2013 and 2020 will come from the USA, China and Japan. In this respect, saturated markets and emerging markets both represent great potential for growth in insurance and reinsurance alike," said Mr Menhart. The report forecast that premium growth for the global primary insurance market will be just under 3% in 2013, and just over 3.5% in 2014, whereas in 2012, the market grew by around 1%. In the short term, emerging countries hold the greatest growth potential for the insurance industry. In the property-casualty segment, the strongest growth can be expected in Asia, said the report. A.M. Best positive over ASEAN insurance market outlook Countries within the Association of South East Asian Nations (ASEAN) are continuing to grow economically and are increasing interest in the region, according to a report from A.M. Best Co. The non-life insurance market has benefitted from this favourable trend, as further economic development could create greater demand for insurance risk products. As a result, regulation and regulatory supervision is still evolving, said the report. Amongst the members of the ASEAN economic community, Indonesia, Thailand and the Philippines have similar non-life insurance markets, which are characterized by fragmentation, with a large number of players possessing little capital. At year-end 2011, 85 non-life insurers operated in Indonesia, with the top 10 capturing more than half of the market premium. The remaining 75 players hold an average share of less than 1%, which continues to reflect a fragmented market, said Best. XL to offer Shariah compliant insurance cover XL Group is to offer Shariah compliant insurance cover to large corporate and middle market clients, initially focusing on property cover, with a maximum capacity of up to USD300m. XL said it is targeting markets worldwide, with the exception of the US and Canada. Having established a binder relationship with Cobalt, an underwriting agency specifically created to provide Shariah compliant commercial insurance and reinsurance products, XL Group has assigned a team of underwriters to focus on these specific covers. Jason Harris, Chief Executive International P&C insurance for XL Group, said, "We are delighted to be the first global insurer in the London market to offer commercial Shariah compliant insurance capacity to large and middle market companies via Cobalt Underwriting. This is a growing, untapped market and as we explore other product offerings, we are looking forward to help develop it." The potential market is significant, according to XL. In 2011 it was estimated that total global Islamic financial assets stood at USD1.631tn. The global Islamic financial services industry is valued at USD1.357tn and continues to defy the global economic stagnation. S&P's new insurer rating criteria and assessments Standard & Poor's Ratings Services has announced new criteria for rating insurers, and has assigned Insurance Industry and Country Risk Assessments to 97 insurance sectors covering 52 countries and four global sectors. "One of the key components of our rating methodology is the insurer's business risk profile," said S&P. "This measures the risk inherent in the insurer's operations, which affects the sustainable return that may be derived from those operations. The business risk profile combines our industry and country risk assessment on the sectors where the insurer operates and the insurer's competitive position in those markets." S&P added, "Some sectors are more global in their nature because the insurers in those sectors typically write business in multiple countries around the world. Consequently, we assess industry and country risk on a global basis for life reinsurance, P/C reinsurance, trade credit insurance, and marine protection and indemnity insurance." For the property/casualty sector, the following countries are assessed as low risk: Australia, Austria, Canada, Denmark, Finland, France, Germany, Hong Kong, Korea, Netherlands, Norway, Singapore, and Sweden. The following countries are assessed as moderate risk: Bahrain, Colombia, Iceland, Italy, Kazakhstan, Morocco, Oman, Poland, Portugal, Russia, Slovenia, Spain and Turkey. The following countries are assessed as moderate risk: Belgium, Brazil, China, Czech Republic, Ireland, Israel, Japan, Kuwait, Malaysia, Mexico, and New Zealand. The following countries are assessed as intermediate risk: Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, United Arab Emirates, United Kingdom, and United States. The following countries are assessed as high risk: Belarus, Nigeria, Philippines and Tunisia. Switzerland was assessed as very low risk. IUA report highlights need for dedicated environmental policy Insurance cover for environmental losses is often incomplete or even non-existent without a dedicated environmental policy in place, according to a new research paper from the International Underwriting Association examining potential environmental claims scenarios. The report highlights the gaps in cover that exist when relying on standard public liability and property policies, or even public liability policies with regulatory clean up and contamination costs extensions. It highlights a range of potential loss scenarios that could affect different business sectors and result in incidents that are both costly and time consuming to handle. "What is most striking about the scenarios is that it is easy to imagine a very wide range of businesses being involved in an environmental incident," said Chris Jones, IUA Director of Market Services. "Environmental liability is clearly not only the preserve of heavy industry." The key message of the report is that the gap between the range of environmental liabilities to which organisations are now exposed and the liability cover provided by traditional insurance policies has become uncomfortably wide and will get wider. "It is important to remember that environmental liabilities are often difficult to manage," Mr Jones warned. "They can take a long time to resolve and involve much technical input which, without an insurer's help, may prove a considerable burden." He added, "The importance of having adequate environmental insurance in place has significantly heightened with the introduction of the EU Environmental Liability Directive which is based on the 'polluter pays' principle. This places strong emphasis on risk assessment, management and prevention by operators. Many EU member states have also required operators to put in place financial security to meet potential liabilities under the directive." Abu Dhabi's financial free zone uncertainties clarified The president of the UAE has issued a new law relating to the Global Marketplace Abu Dhabi, according to an update from Norton Rose. The announcement has clarified some of the initial uncertainties over the financial free zone: - The name of the financial free zone will be Global Market Place Abu Dhabi or Global Marketplace. Global Marketplace will have no taxes and allow those operating within it to be 100% foreign owned. - Global Marketplace authorities will comprise (i) the Global Marketplace Courts (ii) the Global Marketplace Registration Bureau (the regulator) and (iii) the Financial Services Regulations Bureau (the authority). - There will be flexibility to establish different corporate structures within Global Marketplace including companies, branches and representative offices, which will be licensed to carry on business in the Global Marketplace. These will be known as Global Marketplace Establishments. - There will also be Licensed Financial Global Marketplace Establishments which will be those companies, branches, representative offices, which are licensed to carry on regulated financial services in the Global Marketplace. - The regulator will be known as the Financial Services Regulations Bureau. It is intended that Licensed Global Marketplace Establishments may carry out various activities, including insurance, reinsurance and insurance brokerage, including property insurance, casualty insurance, life insurance and other types of insurance and related services. Appointments at Lockton Mexico, Marsh MENA and Allianz Asia Lockton has appointed Marcela Flores as Chief Executive Officer of all Lockton operations and companies in Mexico. Ms Flores will have full authority and responsibility for Lockton's operations in Mexico including employee benefits, actuarial consulting, property and casualty insurance, bonds, and reinsurance. She will report to Fernando Ortega, who remains as Chairman of the board of Lockton Mexico and also will have direct reporting responsibilities to Lockton's international operations. Marsh has appointed Neil Irwin to lead the firm's business development across its Middle East and North Africa (MENA) region. Mr Irwin will be based in Dubai and joins the region's executive committee, reporting to Robert Makhoul, Chief Executive Officer, Marsh MENA. He was most recently managing director responsible for Marsh's business development across Europe. Alexander Ankel, currently CEO of Allianz Turkey, has been named as the new Regional CEO of Asia for Allianz Global Corporate & Specialty (AGCS). He will be based in Singapore, and starts in this new position on July 1, 2013. He succeeds Lutz Fullgraf, who will take up a new role within Allianz Group. In addition to his regional responsibilities for AGCS's offices in Singapore, Japan and Hong Kong, Mr Ankel will also be CEO of AGCS AG's Singapore branch office, succeeding Kevin Leong, who now moves to Toronto where he will run AGCS's Canadian operations as Chief Agent, AGCS Canada. Generali launches Global Corporate & Commercial unit Generali has launched a new Global Corporate & Commercial unit. Generali said that the new platform has been set up to integrate and develop the P&C business and insurance services for medium and large companies at international level. "The Global C&C unit will act on a global scale and deploy an international integrated approach at group level with a central management team and specialised teams active in individual countries. Through the new unit, Generali aims to become a key world player in this segment and expand its market share and profitability," said Generali. From a geographical viewpoint, the initial focus will be on European countries where the group is already highly active in the segment, such as Italy, France, Spain and the UK. In the near future, Generali said it intends to leverage its footprint in the rest of Europe, in Latin America and in Asia-Pacific to serve new clients locally. The Global Corporate & Commercial business unit is headed by Paolo Ribotta, who joined the Group in 2012. China non-life industry report from A.M. Best Direct premium in China's non-life sector annually grew by 23% on average during 2009-2012, according to a new report from A.M. Best Co. "Amid rapid premium growth, non-life insurers faced solvency pressure relative to capital and surplus levels, as evidenced by the peak amount of new capital and subordinated debt issued by non-life insurers in 2011 and 2012," Best said. The report analyses the factors that impact the solvency level of major non-life insurers as grouped by average capital adequacy levels over the past three years, and assesses whether each sector can sustain these levels under current growth rates and operating profitability. Guy Carpenter reports stable April 1 renewal Guy Carpenter & Co has reported that dynamic capital growth and ample reinsurance capacity resulted in a relatively stable renewal at April 1, 2013. The broker said that the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14% of global property catastrophe limit. Guy Carpenter said this environment benefited insurers at April 1, 2013, which is a significant renewal date for the Asia Pacific region. Reinsurance pricing in Asia generally stabilised or fell marginally this year as the adverse conditions experienced in the wake of the Tohoku earthquake in Japan and Thailand flooding in 2011 generally gave way to modest softening. Rates did increase in Korea, however. In the US, non-traditional capacity is having a significant impact on property catastrophe business. Indeed, traditional reinsurance pricing to date has decreased on similar coverages from the January 1 renewal. AXA to acquire 50% of Chinese insurer AXA has entered into an agreement with Tian Ping Auto Insurance Company Limited (Tian Ping) shareholders to acquire 50% of the company. Under the terms of the agreement and subject to regulatory approval, AXA will buy 33% of the company from Tian Ping's current shareholders for RMB1.9bn (EUR237m) and subscribe to a dedicated capital increase for RMB2.0bn (EUR248m) to support future growth. AXA and Tian Ping's current shareholders will jointly control Tian Ping. AXA's existing Chinese P&C operations are expected to be integrated within the new joint-venture. Tian Ping has Property & Casualty licenses covering most Chinese provinces as well as a direct distribution license covering all these provinces and is mainly focusing on motor insurance. AXA and Tian Ping said they will leverage this extensive geographical footprint to further develop their P&C presence in China, including in commercial lines, retail non-motor and health insurance. Swiss Re project to model Latin American seismic risk The Swiss Re Foundation and the Global Earthquake Model Foundation have announced a three-year collaborative project to create the first-ever comprehensive picture of seismic risk in Latin America to incorporate social and economic factors. International and local experts will assess potential physical damage as well as the broader community consequences of earthquakes in this rapidly developing region. The project will create continent-wide earthquake models and hazard maps and will also particularly focus on Lima, Peru and Quito, Ecuador. Michel M Liès, Vice Chairman of the board of trustees of the Swiss Re Foundation and Group CEO of Swiss Re, said, "Earthquakes are a clear and ever present risk in Latin America. Between 1977 and 2012, these natural disasters nearly claimed 80,000 lives and caused economic losses of more than $37 billion. As a reinsurer, our job is to enable individuals, companies and in some cases governments to rebound quickly after a catastrophe." The project aims to identify and estimate the compounding social and economic factors that increase the physical damage of an earthquake and decrease the ability of the local populations to cope with the after-effects of an event. The project focuses on what such a disaster would mean for major cities with its high population and its dense built-up areas and infrastructure.

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